Exchange rates

Foreign exchange can range from a tourist exchanging money at the airport to a multinational company investing billions in offices based in other countries.

The main foreign exchange services that banks offer are:

■ helping businesses to move large sums of foreign money, for example helping exporters who need to accept foreign currency payments and importers who need to pay in foreign currency;

■ basic currency exchange, such as for customers who are going abroad on holiday;

■ wire transfers, also called ‘remittances’, sending currency to a bank in another country, for example when migrant workers send money home; and

■ foreign currency bank accounts for companies and individuals who get paid, and who want to make payments, in foreign currencies.

A strong currency means that its value against other currencies is high, owing to high demand. This results in imported goods being relatively cheap and exports being relatively expensive. Cheap imports can make it difficult for local businesses to compete: they may have much higher costs than foreign suppliers and may be unable to make a profit at the price at which the foreign supplier is selling their goods.